Turbulence in the Airline Industry Through the Years

It's too soon to know how bankruptcy is going to shake out for American Airlines but the airline is not having a good month. Last week alone, American chalked up more than 300 canceled flights and more than 4,000 delayed flights.

The airline blames dissatisfied workers, specifically, a sharp increase in sick calls by pilots, plus crews writing up more last-minute, flight-delaying maintenance orders. The pilots deny any job action, and blame poor mangement. Passengers are caught in the middle of what one pundit calls a "shambles." The airline is in trouble.

But, airlines have seen trouble before - sometimes, terrible trouble - and out of the ashes (in some cases, literally), carriers can emerge triumphant, or they may lie down and die. Others lurch from catastrophe to catastrophe, barely hanging on.

There was no bigger airline tragedy than the horror of 9/11. Nearly 3,000 dead, an immediate suspension of all flights, and then … an eerie quiet. Even when planes returned to the skies, hardly anyone wanted to fly. You almost had a cabin to yourself, or so it seemed. It also seemed as if airlines had begun to die. That they didn't is testament to their willingness to make very tough choices.

United probably should have passed away. Like American, two of its planes were used as weapons of terror in the 9/11 attacks, and turning a profit was going to be nearly impossible. But United and the other major airlines resurrected themselves by doing the hard work of cost and capacity cutting, and dropping perks like meals. It was a good thing, too, as these measures, which included United's bankruptcy declaration in late 2002 and its later merger with Continental, helped see them through the financial crises and crazy oil prices later in the decade, which in turn led to our current era of airline fees.

Yes, there was a government bailout for the airlines after 9/11, but for a total of just $15 billion (per ProPublica). I say "just" because it pales in significance to the 2008 bailouts received by such entities as Fannie Mae/Freddie Mac ($400 billion), Citigroup ($280 billion) and even the auto industry ($25 billion).

In any event, terror can help kill off an airline (at least one teetering on the brink) as we saw in the 1988 bombing of Pan Am flight 103 over Lockerbie, Scotland. Thomas Petzinger's excellent airline history "Hard Landing" (1995) describes how fear ultimately helped finish off the iconic carrier:

"In the Pan Am building cries of sorrow [over the Lockerbie bombing] rang through the hallways. And then, on the reservations line, there was silence. In a matter of hours the airline lost half its transatlantic bookings. In the days ahead more reservations disappeared. Nearly a half-billion dollars' worth of business went away, and there were no new reservations to replace them."